EQT Corp.’s new management team plans to slash spending significantly next year and unload up to $1.5 billion in assets to help cut debt and fulfill the promises made by CEO Toby Rice when he campaigned for control of the company.

“We think the best way to increase the stock price is by delevering the business to thrive in a $2.50 gas environment,” said interim CFO Kyle Derham. “To do this, we are committed to reducing absolute debt by at least $1.5 billion, or 30%, by mid-2020.”

To hit that target, the nation’s largest natural gas producer highlighted an asset monetization program on Thursday during the third quarter earnings call. The company could sell its stake in Equitrans Midstream Corp., which provides the bulk of its gathering and transmission services, for $750 million.

Derham said EQT has no plans to be a “long-term” stakeholder in Equitrans, adding that EQT’s interest would likely be divested in the next nine months. The company could also sell interest in 50,000 core fee acres or sell about 600 MMcfe/d of upstream assets outside its core Marcellus fairway for more than $1 billion. Derham added that the company is actively marketing those assets and in various discussions.

The company has more than $5 billion of debt. Rice took over in July after a nine-month proxy battle to oust former executives. He has since overhauled the management team, which has overseen an operational makeover in recent months to transform what Rice argued was an undervalued and underperforming company.

The deleveraging efforts are important, as Rice promised $500 million of free cash flow (FCF) annually. At current strip pricing, the company expects to generate $200-300 million of adjusted FCF in 2020, or about what his predecessor promised for 2019.

In a preliminary 2020 budget released Thursday, EQT said it would spend $1.30-1.40 billion next year, or $525 million less than this year. The company is guiding for 1.450-1.500 Tcfe of production next year, roughly flat to 2019 levels. Management also cut 2019 capital spending guidance by $115 million.

EQT intends to spend about 65% of its budget on the Marcellus Shale in Pennsylvania, while 19% would be spent on the Marcellus in West Virginia and 16% on the Utica Shale in Ohio. The company plans to run up to three top hole rigs and up to four horizontal rigs and completion crews next year.

The company has implemented a strategy called combo development, which emphasizes planning wells years in advance to improve midstream constraints and lower costs. More wells with longer laterals will be added to pads in areas with the strongest economics to improve efficiencies.

During the third quarter, EQT executed an exchange in West Virginia for 16,000 net acres with another large operator that enhanced the continuity of its position in Wetzel and Marion counties. The move will allow longer laterals. As a result, EQT has placed a 25-well combo development run for the property on its operations schedule for 2021.

“This is driving West Virginia well costs down faster and lower than we originally expected,” Rice said of the exchange. “As we look at our long-term operations schedule, West Virginia will become a much larger focus area in the coming years.”

Derham noted that the company has hedged 87% of its 2020 gas production at a weighted average floor price of $2.71/Dth, “which will provide downside protection if gas prices flip further.”

If commodity prices do remain volatile, Rice said the company could maintain 2020 production volumes, which would mean a 2021 budget of about $1.15 billion and a 2022 budget of $925 million.

“Ultimately, our long-term activity levels and FCF profile will be dictated based on gas prices, but will also be influenced by our negotiations with Equitrans...to lower our gathering and transportation costs.”

Derham did note that the Appalachian rig count has fallen to around 52, or near the level where management believes production in the basin will level off. Associated gas growth in Texas, meanwhile, has been constrained by available takeaway. If new projects continue facing delays, such as Kinder Morgan Inc.’s Permian Highway Pipeline, that could hold back even more gas, he added. Derham said those factors, along with the potential for stronger liquefied natural gas demand, could help lift prices by 2021.

EQT produced 381 Bcfe in the third quarter, or 4.14 Bcfe/d, up from 374.2 Bcfe in the year-ago period and 370 Bcfe in 2Q2019.

Average realized prices fell 11% year/year to $2.47/Mcfe in the third quarter. Revenues were down to $951.6 million in the period from about $1 billion in the prior year.

EQT reported a third quarter net loss of $361 million ($1.41/share), compared to a net loss of $127 million (49 cents) in 3Q2018. Management said the steeper loss resulted from lower revenue and higher proxy, transaction, reorganization, and general and administrative costs, among other things.